Maintain BUY on UltraTech Cement - Well-rounded performance - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities

During 2QFY21, UTCEM reported solid earnings beat, driven by strong cost controls, healthy realisation and strong retail demand. Consolidated net sales/ EBITDA/APAT surged 8/41/113% YoY to Rs 103.54/26.95/12.34bn respectively. Working capital reduction and lower Capex further drove a 42% YoY fall in net debt. Management has guided that non-trade demand is recovering well, which should boost sales hereon. Continued cost controls should further support UTCEM's strong margins. In line with our view, UTCEM continues to deliver margin expansion, asset sweating, and debt reduction. We maintain BUY with a higher Target Price of Rs 5,670/share (15x Sep'22E consolidated EBITDA).

Results highlights: Total sales volume firmed up 7% YoY, buoyed by strong retail demand. Utilisation recovered to 70% vs 66% YoY. Blended NSR stood flat YoY, down 1% QoQ. Grey NSR fell a modest 3% QoQ (seasonal correction). UTCEM reported strong cost beat, as opex fell 7% YoY. This is mainly led by a sharp reduction in other expenses, as UTCEM has been able to stabilize operations for Nathdwara and Century plants. Lower fuel costs and increasing share of green power also aided lower opex. Subsequently, unitary EBITDA firmed up 31% YoY to Rs 1,343/MT. Over the past six months, its gross/net debt fell 1/28% on EBITDA recovery, working capital release and low Capex outgo, thus driving down interest cost by 30% YoY for 2QFY21.

Outlook: In line with our view, UTCEM continues to deliver margin expansion, asset sweating, and debt reduction. We increase our consolidated EBITDA estimates for FY21/22/23E by 11/7/4% to factor in healthy demand and cost outlook. We maintain BUY with a higher target price of Rs 5,670/share (15x Sep'22E consolidated EBITDA).

Shares of ULTRATECH CEMENT LTD. was last trading in BSE at Rs.4629.6 as compared to the previous close of Rs. 4547.4. The total number of shares traded during the day was 50704 in over 8926 trades.

The stock hit an intraday high of Rs. 4656.9 and intraday low of 4439.5. The net turnover during the day was Rs. 231911711.

Source : Equity Bulls

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